Real Estate Investments

February 19, 2011

Real Estate Investing for Investors and Homeowners

The family home is the largest single purchase for most Americans. The family residence or home is also the largest asset or single investment of most Americans. They may hold a larger stock portfolio, but the risk is often diversified across many companies (individual investments), in differing sectors to reduce risk.

Different Types of Real Estate Investing

There are two broad ways for both real estate investors and homeowners to make money on real estate investments: real estate appreciation (increases in the value) of property you buy directly, and investing in real estate financial instruments (such as ownership of shares in a real estate investment trust (REIT), stocks of housing developers, or as a lender). The real estate statistics, neighborhood-specific home appreciation rates, housing data, apartment rental rates, demographics and neighborhood characteristics (like crime rates, public school ratings, and income levels) that NeighborhoodScout uses in its search engine to instantly find neighborhoods that match a homebuyer’s personal criteria and map the neighborhoods, are also extremely powerful for targeting neighborhoods for real estate investment. More than two thousand real estate investors and REITs currently subscribe to NeighborhoodScout to use the search engine as a real estate investing tool.

Real Estate Appreciation on property you buy directly

Real estate investments for property you buy directly include the family home, vacation homes, second homes, or rental properties. The difference between what you pay and sell the property for is the amount of profit, after subtracting costs of ownership. Rental properties may also have a positive cash flow component if the total rent is greater than the expenses of owning the property. NeighborhoodScout will help you identify the best neighborhoods in your area to invest, as well as identify neighborhoods in which to invest in other parts of the US, by mathematically calculating which neighborhoods best match the unique combination of attributes which you, as an investor, enter into the patented search engine. In addition, you can use NeighborhoodScout to calculate and list neighborhoods that are demographic matches to more expensive, high-appreciating areas which may be poised for rapid future increases in real estate values.

Real Estate Financial Instruments

Residential real estate investment trusts (REITs), developers, builders, and other real estate investing companies can use NeighborhoodScout to search any area of the U.S. to find the areas in which your company has not yet invested, but that are mathematically similar to neighborhoods where your most successful investments or developments are currently located, so you can focus on repeating your greatest successes. The precise findings from the NeighborhoodScout search engine can help improve your firm’s success in targeting areas that will likely produce higher than normal returns, while helping you avoid less than optimal real estate investment locations. Additionally, residential REITs, builders and developers can use the NeighborhoodScout search engine to quickly and accurately identify specific neighborhoods that match any unique combination of investment criteria you enter into the search engine, or to even find a lower cost neighborhood that is in all other ways a mathematical match to a neighborhood where the company’s investments have ridden upwards, and can now be reinvested at the ground floor in a newly identified set of neighborhoods that are likely to have rapid increases in real estate values, or better hold their property value when other areas are losing value.

NeighborhoodScout Real Estate Appreciation Rates

As but one element of hundreds included in the search engine, NeighborhoodScout reveals home appreciation rates for each neighborhood in America as a percentage change in the median house value for the latest quarter, the last 12 months, the last 2-years, the last 5-years, the last 10-years, and even from 1990 to present. This last long-term look shows neighborhoods that have continued to appreciate through both up and down real estate markets, providing exclusive insights into which neighborhoods are likely good investments for the future. Remember the stock market in 1999 – everyone appeared to be able to pick great stocks because most stocks were rising. But only select stocks did well after the downturn in 2000-2001. Real estate markets are likewise cyclical, and NeighborhoodScout’s data take that into account, at the individual neighborhood level.

Our data are designed to capture changes in the value of single-family homes at the neighborhood level. Different neighborhoods within a city or town can have drastically different appreciation rates. NeighborhoodScout vividly reveals such differences. Our data are built upon median house values in each neighborhood, and combine data from the United States Bureau of the Census with quarterly house resale data provided to the FHFA by Fannie Mae and Freddie Mac. The data reflect appreciation rates for the neighborhood overall, not necessarily each individual house in the neighborhood.

We also show how each neighborhood’s appreciation rate compares to other neighborhoods in the nation, and within the same state (e.g., 9 relative to the nation, 5 relative to California [10 is highest]). This helps to identify regions, metro areas or states for investors to diversify holdings across the nation and the best potential for appreciation in the expansion of the real estate portfolio. This makes comparisons of house appreciation rates equally easy for professional investors and individual homebuyers.

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